The number of people suing the state increased by two Thursday, because of the way Gov. Mike Easley tried to balance the state’s budget the last fiscal year.

And while the plaintiffs’ lawyers are familiar faces in lawsuits against the state, the litigants are new.

Former State Sen. Bill Goldston and former Secretary of Transportation Jim Harrington filed a complaint in Wake County Superior Court, because Easley in February transferred $80 million from the state’s Highway Trust Fund to balance the general budget. The lawsuit argues that transferring any money from the dedicated fund violates the state constitution.

“My single goal in this lawsuit,” Harrington said, “is to make sure the taxes that have been diverted are returned to the Highway Trust Fund and used for the original intended purposes, as our constitution says it must.”

Both men repeatedly referred to Article 5 Sec. 5 of the constitution, which says, “Every act of the General Assembly levying a tax shall state the special object to which it is to be applied, and it shall be applied to no other purpose.”

Goldston and Harrington were key leaders who helped establish the Highway Trust Fund in the late 1980s. Goldston, a Rockingham County Democrat, chaired the Senate Transportation Committee and the State Highway Study Commission, which created the plan for expanding and improving intrastate highways, urban loops, city streets, and secondary roads. Harrington, who served under former Republican Gov. Jim Martin, initiated and later consulted for the Highway Study Commission. The commission’s work resulted in the 1989 Highway Trust Act.

The two plaintiffs are represented by the Raleigh law firm of Boyce & Isley. The lawyers are also representing 22 counties and cities in another lawsuit against the state, because Easley used tax reimbursement money intended for municipalities to help close the state’s budget gap.

The state constitution requires the governor to keep the budget in balance, and in February 2002 Easley transferred revenues from several sources to do so. However lawyer Gene Boyce argues that the constitution authorizes the governor only to “effect the necessary economies in state expenditures,” and may not use money from dedicated funds.

In addition to February’s transfer, the state budget for this year takes $205 million from the Highway Trust Fund.
“The legislature does not have the authority to appropriate those funds,” Harrington said at a press conference. “That’s why we went to the trouble to [set it up] the way we did.”

Ahead of the Curve

• Though Lt. Gov. Beverly Perdue said it was “about making history," the first-ever state legislative session to consider a governor’s veto was a real snoozer. About one-fourth of the House and Senate gathered in separate, simultaneous sessions to quickly shuffle Gov. Mike Easley’s veto of a bill to a committee next year. The bill made appointments to several state boards. The Winston-Salem Journal reported that the lawmakers who showed up in Raleigh mostly discussed election results, and who the next House speaker might be. “I hope all members of the (Republican) caucus will support whoever a majority of the caucus selects,” said House Minority Leader Leo Daughtry, who is a candidate for speaker for the new session starting in January. The GOP caucus was to meet over the weekend.

• After last week’s election results were digested, some North Carolina newspapers speculated on the future of two of the state’s delegation in Washington, D.C. The Journal analyzed the options of Rep. Richard Burr, R-5th, who has long been considered a solid candidate for governor or U.S. Senate. “This is a decision that I need to make fairly quickly,” Burr said. The Charlotte Observer reported that U. S. Sen. John Edwards, who is considering a run for the presidency in 2004, was one of the few Democrats helped last week, because most of the party’s other top leaders were “tarred by the Democratic disaster.”

Feature 2Secret Ingredients Politicians cooking, but school may get a raw deal

In June, when Johnson & Wales University and Charlotte officials announced a new $82 million school for downtown Charlotte they said it was being subsidized by local tax dollars and private funds, but they made no mention of any subsidies from the state.

On Nov. 6, The Charlotte Observer reported that the state was putting in $10 million to help lure Johnson & Wales University to downtown Charlotte. The $10 million commitment from state officials was made in secret. Subsequent Observer stories and CJ’s own investigation revealed officials cannot explain where the money would come from.

Johnson & Wales is a private career school whose main campus is in Providence, R.I. The school is best known for culinary training, but it also offers hospitality and business programs.

The school is scheduled to open in September 2004, but several employees are already working in leased office space at the Gateway Center on West Trade Street in downtown Charlotte. Eventually closing their schools in Norfolk, Va. and Charleston, S.C., school officials expect to have 250 employees and 2,800 students in Charlotte by 2007.

In a series of stories the Observer revealed that prior to the June announcement Senate President Pro Tem Marc Basnight, House Speaker Jim Black, and Gov. Mike Easley all wrote letters indicating their support for the project and their commitment to securing $10 million.

Black’s was perhaps the strongest commitment. “You have my personal commitment of support for a $10 million investment over the next five years by the State of North Carolina for this project,” said Black in a May 23, 2002 letter to University President Dr. John A. Yena.

In an interview Nov. 8, Black’s spokesman, Danny Lineberry, told CJ that Black intended only to try to find the money. When asked where it would come from he said, “Wherever they can find it. It may not come from anywhere. The speaker made a commitment to try to get it.”

With Republicans now having a 61-59 advantage in the next legislative session, Black will likely be replaced as speaker and his “personal commitment” may be more difficult to honor.

While the governor does have a discretionary economic development fund called the One North Carolina Fund, it contains about $3 million in uncommitted money.

CJ tried to speak directly with Dr. Yena, but he did not return several phone calls. Judith Johnson, executive director of University Relations, eventually returned a call for him.

When asked whether the $10 million was essential for the move, she said, “Jack Yena has said that we would not come without the $10 million.” When asked what assurance the school had, she replied, “We believe in business by a handshake. The legal documents are being worked up.” She also said she did not know exactly where the money would come from. “We were not aware of the specifics. We felt the commitment is coming.” And what if it doesn’t? “That is a separate issue,” she said.

As of Friday, Johnson & Wales had still not contacted the N.C. Department of Commerce. Spokesman Tad Boggs told CJ, “There is no ironclad commitment. The company has never come to us and indicated a desire to get anyone North Carolina Fund money.”

Capital Quotes

• “I’m certainly going to examine the position I would be in in order to help my constituents.”

— Rep. Cary Allred, R-Alamance, discussing with the Shelby Star who he will support for House speaker. Allred, though a Republican, is friendly with Speaker Jim Black, D-Mecklenburg. Two years ago Allred agreed to back Black if the vote were close. Allred was rewarded with the chairmanship of the House Ways and Means Committee and co-chairmanship of the House Transportation Committee.

• “There is no question that the state is taking on more risk.”

—Patrick Conway, University of North Carolina at Chapel Hill economics professor, commenting to the Associated Press on recent changes in the portfolio of the N.C. Teachers and Employees Retirement System. The pension fund is paying out $150 million more in benefits per month than it is taking in collections from employees, in part because the state did not make its scheduled contribution this year. To compensate, the fund is seeking a higher return by selling bonds and buying more stocks. International stock holdings, for example, will grow from 7 percent of the funds assets to 14 percent.

• “We had obviously been challenged based on relationships. But the decision to go with (BioVista) is just stellar qualifications.”

— Valeria Lee, president of the Golden LEAF Foundation, defending to The Charlotte Observer her organization’s decision to invest $30 million in BioVista, a still forming biotech venture capital firm. BioVista is tied to John Crumpler, a major donor and fund-raiser for Gov. Mike Easley, with little apparent experience in the field. As a result of concerns about political favoritism in handing out its funds, Golden LEAF has asked its consultants to complete negotiations with BioVista.

Feature 3Gauging the ElectionPanel analyzes results at Locke luncheon

State and national pundits headlining a John Locke Foundation luncheon Nov. 11 offered various, and sometimes conflicting, analyses of the midterm election after a recount of votes in a key state race apparently shifted the N.C. House to Republican control.

All five members of the luncheon’s panel, however, agreed that circumstances aligned in Republicans’ favor to do well, surprisingly, almost everywhere.

“Nobody saw anything in terms of a tide or a wave,” said David Keene, chairman of the American Conservative Union in Washington.

He said President Bush took nearly everyone by surprise with his tireless campaigning in the weeks leading up to Election Day. “George W. Bush made this his election,” and the president got “his” base out, Keene said.
Panel member Bill Lee of Tel Opinion Research in Washington also said Bush helped seal the election for the GOP because he was a “visible [president] who was all over the country.” Lee said the impending threat of war and national economic turmoil drove voters to stability.

“The voters were looking for security, and they saw the chief executive very active,” he said.
Lee contrasted the energy and symbolism of Bush, who appeared in North Carolina on behalf of Elizabeth Dole five times, with the disarray of Democrats.

“The Democrats were not able to advance an issue,” Lee said. “There was no Democratic leadership nationally.”
Lee also attributed GOP successes, based on his polling information, to a 2 percent increase in turnout, or 4.5 million more votes cast nationwide, compared to the last midterm election. He said most of those votes went to Republicans. He also said the generic vote trended toward the GOP throughout most of the pre-election period.
Most poll respondents said the economy was the most important issue affecting their votes.

News & Observer of Raleigh political columnist Rob Christensen agreed that “the election was obviously just right for the Republican Party,” but he said the attacks of Sept. 11 and subsequent war talk played a large part in the party’s successes. Most of Christensen’s election coverage assignments focused on the Dole’s race against Democrat Erskine Bowles, which he said helped other Republican candidates in North Carolina.

Christensen said that in Dole, the national Republican Party had recruited “a rock star,” who was “one of the most popular women in the country.” Saying he had not seen anything like her campaign before, Christensen suggested she may have been a better candidate than was Jesse Helms, whom she will succeed.

Christensen said he observed that many women who were normally reliable Democratic voters turned out at Dole rallies. He also said Bowles in many ways was not the right candidate to oppose Dole because of his perceived changes of position on free trade and tepid support from black constituencies and the state’s teachers’ union.

Locke Foundation President John Hood said the presence of Dole on the ballot didn’t help state GOP candidates much, but redistricting, tax increases, and other local issues likely played a larger role.

On The Cutting Edge

Pre-Columbian Health

• It is well-established that Europeans brought a number of diseases to the New World that indigenous people had no immunity against, such as smallpox, measles, malaria, and yellow fever. The epidemics that resulted decimated some Indian populations.

However, recent research indicated that the general health of Native Americans had apparently been deteriorating for centuries before 1492. That is the conclusion of anthropologists, economists, and paleopathologists who studied the health of people in the Western Hemisphere over the last 7,000 years by analyzing more than 12,500 skeletons from 65 sites in North and South America.

Rating the skeletons for signs of various diseases, they found that the healthiest sites for Native Americans were typically the oldest sites, predating Columbus by more than 1,000 years.

More recent pre-Columbians were malnourished and in poorer health. However, they found that nomadic 19th century Indians of the Great Plains enjoyed excellent health, near the top of the index.

The researchers attributed the widespread decline in health to agriculture and urban living. Urban diets were less varied and diseases spread easily — as happened in the earliest cultures of the Middle East.

Even so, in the simplest hunter-gatherer societies, few people survived past age 50. In the healthiest cultures in the 1,000 years before Columbus, a life span of no more than 35 years might be usual.

Interestingly, other paleopathologists have recently discovered clear traces of tuberculosis in the lungs of 1,000-year-old Peruvian mummies, evidence that native Americans might already have been infected with some of the diseases previously thought to have been brought to the New World by European explorers.

Reported in the New York Times, 10-29-2002.

Education Distribution

• According to the Census Bureau figures released in June, one-fourth of Americans have college degrees — an all-time high. During the 1990s, the number of people with a sheepskin increased by well over one-third, while high school dropouts declined. But the bounty of the educated is not evenly distributed across the country.

States and local communities wishing to improve their tax bases attempt to lure the best and brightest. At the same time, new immigrants with below-average education are locating in gateway regions, where affluence has driven demand for low-skill services — restaurant workers, office cleaners, and the like. This creates the potential for local “barbell economies,” with bulges at both ends of the education scale.

In the District of Columbia, nearly four out of 10 residents have college degrees, while one in three are so blessed in Massachusetts — and one in seven in West Virginia.

In Mississippi, Kentucky, and Louisiana, more than one out of four adults did not finish high school, compared to about one in eight in Minnesota, New Hampshire, and Utah.

Latino border metros McAllen, Laredo, Brownsville, and El Paso, however, show large concentrations of dropouts.

The nation as a whole showed a decline in high-school dropouts, but seven Western states plus Texas bucked the trend. The common thread: significant increases in Latino populations.

Several states with dropout gains were also states that had big gains in college graduates. The resulting barbell effect is even more pronounced in Las Vegas, Phoenix, and other metros — a selective-migration pattern long evident in the more mature gateway area of Los Angeles, which is a magnet to low-skilled service workers from Latin America.

Reported in the Milken Institute Review, Third Quarter, 2002.

Employee Absences

• Some employees are rebelling against cuts in official time off by taking unscheduled absences from work, human resources experts report. Such practices are costing companies serious money.

In 2002, the cost per employee for unscheduled absences reached an annual average of $789 — an all-time high and an increase of nearly 30 percent since 2000. Unscheduled absences for personal needs rose 21 percent in 2002.

According to a survey by CCH, a provider of human-resource and employment-law information, employees during the past year were more likely to take unscheduled sick time to meet personal and family needs than for actual illnesses.

Twenty percent of employees acknowledge that they try to take more vacation days than they are entitled to, according to Fodor’s Travel Publications.

At the same time, the amount of paid time off is dwindling. The proportion of companies having paid vacation has fallen to 91 percent this year from 95 percent in 1999, according to the Society for Human Resource Management. Companies offering paid personal days — aside from sick and vacation days — have dropped to 46 percent from 57 percent.

Experts theorize that employees resent their employers playing around with their time-off benefits, and are fighting back.

Reported in USA Today, 10-29-2002.

Coming Up

• On Jan. 27, the John Locke Foundation will welcome renowned author and reporter Bill Gertz to speak at a special luncheon. The national security and defense writer has just released his new book, Breakdown: How America’s Intelligence Failures Led to September 11.

Gertz is an internationally recognized newspaper reporter who has specialized in writing major stories on a wide variety of defense, intelligence, and international security issues.

A veteran defense writer who specializes in coming up with inside stories, often based on classified documents, he is widely viewed as one of the best reporters in his field. His sources within government are extensive. Gertz has broken a number of stories with international implications. As former CIA Director R. James Woolsey put it, “When I was DCI [Director of Central Intelligence] Bill used to drive me crazy because I couldn’t figure out where the leaks were coming from. Now that I’ve been outside for two years, I read him religiously to find out what’s going on.”

For more information or to pre-register, contact Kory Swanson or Thomas Croom at (919) 828-3876 or events@johnlocke.org.

Material published here may be reprinted provided the
Locke Foundation receives prior notice and appropriate credit is given.